General Motors is in preliminary talks to buy Chrysler, the struggling US arm of DaimlerChrysler, a source familiar with the situation said yesterday.
The talks, described by the source as exploratory, were first reported yesterday by the trade journal Automotive News.
GM and Chrysler parent DaimlerChrysler both declined to comment on the talks.
Shares of DaimlerChrysler rose in reaction to reports of the talks. GM shares slipped at first but then moved higher.
Automotive News, citing unnamed sources in Germany and the US, said the firms were engaged in high-level talks about GM buying Chrysler Group, which sells Chrysler, Dodge and Jeep vehicles, in its entirety.
The source said it was questionable whether GM would want Chrysler's finance business, having sold its own finance arm, GMAC, last year.
Speculation surrounding a possible sale or spinoff of Chrysler has built since DaimlerChrysler chief executive Dieter Zetsche said earlier this week that all options were open for its struggling North American unit.
DaimlerChrysler shares were up 4.1 per cent to $73.11 in afternoon trading on the New York Stock Exchange.
Shares in GM, the world's largest automaker, were up 14 cents at $36.58.
Analysts questioned whether GM would benefit from an outright merger with Chrysler, since both automakers are struggling with excess production capacity and sliding sales.
